Buy-to-let boom sees landlords make over £20,000 per property in the past year

20th June 2014

Landlords have made an average of £20,000 on every property they own in the past twelve months thanks to rising house prices and accelerating rents.

The latest buy-to-let index from LSL Property Services shows total annual returns on the average rental property have reached a four-year high at 12.2% in the twelve months to May – up 5.3% over the same period to May 2013.

LSL said this means the average landlord in England and Wales has seen a return of £20,133 in the past twelve months, made up of £8,107 rental income and £12,206 of capital growth.

If growth continues at the same pace, landlords could find themselves even better off over the next 12 months, earning an equivalent of a 13.4% total annual return amounting to £23,718 per property.

David Brown, commercial director of LSL Property Services, said: ‘Rents are steady with yields at historic averages. Coupled with faster turnarounds between tenancies and tenants who are less likely to fall into arrears, these steady incentives are proving their worth. Stability has returned to the rental market.’

Rents rose 0.6% in May, up from zero in April, but annual increases remain gradual and the average rent is now only 1.1% higher than in May 2013. Rents have been rising below inflation, which currently stands at 1.5%, for 12 consecutive months.

In absolute returns average rent has risen by just £8 in the past year and currently stands at £745 a month compared to £737 in May 2013.

Brown said the sub-inflation rent increases will help millions of tenants and ran counter to the concerns about rents becoming unaffordable.

‘Private renting is becoming cheaper in real terms. May’s sub-inflation rent rises will help over nine million tenants,’ he said. ‘These trends put the recent politicisation of the rental market in stark contrast to reality. Rents are not a single pound higher than they were in December – yet over the same six months some politicians have portrayed the industry as facing some sort of crisis. The squeeze on living standards may well be the biggest challenge of our age but rents are not the cause.’

Even London rents, which are the highest in the country have fallen dramatically. Both the capita and the South East have seen annual rent rises below the overall average, with rents in the capital just 1% higher than they were in May last year and 1.2% higher in the South East.

‘London is a dramatic example of how a prospering housing market can feed through to tenants. In absolute terms, the capital is naturally more expensive to live in than elsewhere, but the pace of change is now going in the right direction. In the last year London’s annual ent rises have dropped from highs of almost 8% a year to only 1%.’